Social Cost of Carbon Is a Case Study on Courts, Executive Orders

• Author: Bethany A. Davis Noll
• Position: Wxecutive director at NYU Law's State Energy & Environmental Impact
• Pages: 13-13

MAY/JUNE 2021 | 13

Reprinted by permission from The Environmental Forum®, May/June 2021.

Copyright © 2021, Environmental Law Institute®, Washington, D.C. www.eli.org.

In the Courts

The Biden administration’s use

of executive orders to make

policy and direct agencies has

already come under attack. A coali-

tion of attorneys general has sued the

Biden administration for its execu-

tive order setting up an interagency

working group to provide guidance

on how to estimate the damage of

greenhouse gas emissions. And an-

other lawsuit challenges the execu-

tive order revoking the Keystone XL

Pipeline’s permit.

Presidents have long used execu-

tive orders to make policy. At a talk he

gave at the American Enterprise In-

stitute last year, former EPA Admin-

istrator Andrew Wheeler explained

that executive orders were necessary

at the beginning of

the Trump adminis-

tration to direct sta

before the political

leadership was in

place.

And the Trump

administration used

executive orders to do cross-cutting

policy, directing agencies to repeal

two regulations for every one that

they issued. e lawsuit over the

Biden administration’s Social Cost of

Carbon actions thus provides a good

chance to shine a light on the use of

executive orders and the legal status

of the Social Cost of Carbon — the

“most important number you’ve nev-

er heard of,” as Michael Greenstone,

a University of Chicago economics

professor, recently put it.

e Biden administration an-

nounced in Executive Order 13990

that it is the policy of the admin-

istration to “listen to the science.”

In line with that new policy, the

administration reconstituted the

Interagency Working Group on So-

cial Cost of Greenhouse Gases and

rescinded the Trump-era estimates.

e working group published new

interim estimates for the damage

from greenhouse gas emissions.

e new numbers are based on

the estimates developed under the

Obama administration, adjusted for

ination, and they will be used until

a further comprehensive review can

be nalized in line with EO 13990.

ose Obama-era numbers were

subject to signicant and thorough

vetting, review, and updates. And an

agency’s use of those numbers was

upheld as reasonable in a 2016 case

out of the U.S. Court of Appeals for

the Seventh Circuit.

But one of the lawsuits against the

Biden actions alleges that the execu-

tive branch has “arrogated” to itself

the “unilateral power” to dictate

the social cost of greenhouse gases.

Directing agencies

to apply consistent

analytical procedures

through executive or-

ders dates back to the

1980s, when Presi-

dent Reagan issued

EO 12291, requir-

ing agencies to choose the regulatory

scheme that maximizes “net benets

to society.”

And absent the working group’s

numbers, agencies face some jeopar-

dy in court. In a 2008 case about fuel

economy standards, a federal appeals

court held that a National Highway

Trac Safety Administration deci-

sion to place zero monetary value on

greenhouse gas emissions was arbi-

trary and capricious, and remanded

the rule to the agency, instructing

it to promulgate new standards that

were more reasonable.

In leasing decisions, where an

agency has considered and relied on

the monetary benets of the lease, at

least a few federal courts have said

that it is arbitrary and capricious

not to monetize the climate damages

caused by those decisions. At a recent

argument at the D.C. Circuit, the

panel hearing argument over a Ten-

nessee Gas Pipeline Co. LLC proj-

ect questioned the Federal Energy

Regulatory Commission’s failure to

consider downstream greenhouse gas

emissions in its pipeline decisions.

(e agency recently acknowledged

that it should do so for the rst time,

in a pipeline decision involving

Northern Natural Gas Company.)

In a case going the other way, a U.S.

district court in Montana upheld a

Trump agency’s decision not to rely

on the Social Cost of Carbon. But

that case is on appeal.

In addition, agencies face legal

jeopardy if they rely on estimates

that do not have the support of a

robust analysis. Last year, a U.S.

district court in California struck

down the Trump administration’s

attempt to use its own vastly de-

pressed estimate for the damages

from greenhouse gas emissions,

holding that the administration

had ignored the best available sci-

ence.

Presidential policymaking by ex-

ecutive order is likely here to stay.

Indeed, the president has long had

the authority to instruct agencies to

work together to produce reasonable

and vetted analyses. Using those ex-

ecutive powers to constitute an inter-

agency working group that provides

guidance to agencies on how to value

things like the climate damages from

greenhouse gas emissions — in the

face of likely litigation risks when

that valuation is missing — seems

like a useful approach.

Social Cost of Carbon Is a Case

Study on Courts, Executive Orders

Trump used them.

Now Biden is being

challenged in court

for the same tactics

Bethany A. Davis Noll is

executive direc tor at NYU Law’s

State Energ y & Environmenta l Impact

Center: bethany.davisnoll@nyu.edu.